Mobile payment players in Asia Pacific are diversifying to drive growth

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Asia Pacific continues to lead the global mobile money market both in terms of growth and innovation. In terms of growth, the region has the highest mobile payments adoption rate. Forerunner in terms of mobile payments adoption globally is China, leading with 79% of its population using mobile payment platforms.  Other markets in the region have also recorded rapid rise in usage of mobile payments, with Singapore ranking second in terms of adoption rate at 69%. Philippines has emerged as one of the fastest-growing markets globally, recording a 20% increase in its population using mobile payments in Q3, 2019.  Rise in adoption of mobile payments by users has been substantial in the region owing to deployment of innovative technologies, smartphone advances and penetration that has in turn raised the consumer demand for faster and better mobile-supported payments system.

In line with the market growth, the mobile payments players have recorded steady growth over the last few years. To sustain growth, mobile payment players are diversifying their offerings, creating new revenue streams. This involves expanding product portfolio and connecting customers with third party services across industries. Diversification strategy in general has focused on developing multifunctional model of offering linked services, personalized services, and enterprise solutions. These solutions are supported by rewards and loyalty programs.

Diversification is primarily driven due to intensifying competition, regulatory pressure, and increased adoption of mobile payment across key end markets

The intensifying competition in the mobile payment industry is making key players aggressively focus on diversifying revenue streams and target businesses with specific payment solutions. Increasing accessibility and smartphone adoption are strengthening the transformation, giving further impetus to the providers to innovate and improve the services. To cope up with the robust ecosystem and enrich the user experience, mobile payment companies are entering into strategic partnerships, using innovative technologies and leveraging information to develop a dynamic payment system.

Interestingly, we are witnessing a range of diversification strategies playing out in different markets, a trend expected to continue over the forecast period

Regulatory pressure is another factor that is making mobile payment companies to venture into related as well distinct business alternatives. For example, both China and India have introduced stringent regulations for non-bank payment firms.

In China, non-banking payment companies are not allowed to hold customer deposits and are required to place 100% of the deposits under an interest-free account. Earlier, these companies could hold the amounts prepaid by the buyers for a period up to two years before transferring it to merchants, which enabled them to earn interest on these funds by depositing into bank accounts. According the People’s Bank of China, total of these funds was estimated to be over US$ 200 billion by the end of Q1 2019, compelling the central bank to introduce rules to regulate these funds.

India has also been regulating the non-banking payment market to promote digital payment.  Enforcement of KYC norms obligatory for customers of non-banking financial entities led to loss of many customers for the mobile wallet companies such as PayTM and Mobikwik.

Moreover, there is high competition in the Indian mobile payment sector which is compelling companies to diversify. Largest player PayTM has ventured into education payments, entertainment services and health care payments in the past one year. The company has diversified its services portfolio and initiated customized payment solutions to large institutions. Flipkart’s mobile wallet company, PhonePe, is also planning to expand its horizon to become a major financial services player by including insurance, wealth management and lending to its business portfolio.

Thailand is prominent for the inclusive mobile wallet market into the comprehensive digital wallets and like its Asian counterparts has been promoting digitalization of payment. TrueMoney Wallet, Thailand-based Wallet Company, started as a digital payment service for payment of bills and purchases. It has also diversified its offerings to top-up services such as gaming, payment gateways and cross-border remittances.

Japan’s Line Pay is also entered into partnerships to make itself more than just a wallet company. The company expects promising growth prospects owing to impetus from Japanese government to increase mobile payments adoption as part of the preparation for the 2020 Olympics. It has established a partnership with Tencent’s WeChat app to allow users to pay through the app at the points of sale of Line Pay. In addition, Line has also partnered with Mizhou Bank to establish a digital bank by 2020.

To know more about changing mobile payment market dynamics in Asia Pacific, click here.